Policy History
 CAP has become ‘more competitive’ (WTO rules)
Source: DGAgri CapReform Impact Assessment, 2011
INTER MS COMPETITION?
 Present EU SFP clearly NOT ‘competitive’ – not a ‘level
playing field’
INTER MS COMPETITION?
 Proposed ‘reform’ very little better:
INTER MS COMPETITION?
 What would an “objective” distribution be?
INTER MS COMPETITION?
 What would a “Green” distribution be (Re-focus)?
Green?
700.0
600.0
Greece
500.0
Malta
Netherlands
DP(2013)/ha (€)
Belgium
400.0
Denmark
Cyprus
Italy
Germany
Ireland
300.0
Slovenia
France
L'bourg
Czech
Hungary
Spain
200.0
Austria
Sweden
Finland
Poland
UK
Slovakia
Bulgaria
Lithuania
Estonia
100.0
Portugal
Romania
Latvia
0.0
0
5
10
15
20
25
30
% UAA designated Natura 2000
DP/ha v. Natura 2000 % UAA? Correlation: -0.075; [with land of ‘high nature value’, -0.14]
– rewards, or incentives?
Better Targeted (1)?
35000
Netherlands
Malta
30000
GVA/person employed in Agriculture (2009)
Belgium
France
Luxembourg
Spain
Italy
25000
UK
Cyprus
20000
Denmark
Germany
15000
Austria
10000
Finland
Greece
Sweden
Ireland
Hungary
Estonia
Slovenia
5000
Portugal
Poland
Latvia
Bulgaria
Lithuania
Czech Rep.
Slovakia
Romania
0
0
2000
4000
6000
8000
10000
12000
14000
16000
Direct Payment/person employed in Agriculture
DP with GVA? Correlation: +0.5, in the ‘wrong’ direction! Reduced to +0.08 if DPs
deducted from GVA
Better Targeted (2)?
60000
L'bourg
GDP - GVA per capita gap (€)
50000
40000
30000
Austria
N'lands
20000
Slovenia
Malta
Portugal
10000
Poland
Latvia
Estonia
Hungary
Bulgaria
4000
Denmark
UK
Germany
Italy
2000
Ireland
Czech
Greece
0
0
Sweden
Belgium
Slovakia
Lithuania
Romania
Finland
Cyprus
6000
Spain
8000
10000
France
12000
14000
16000
Direct Payment per person employed in Agriculture (€)
DP with Ag income Gap? Correlation: +0.2, but clearly dominated by an outlier (Lu)
Back to Basics – the ‘Canute’
problem part 1
 ECONOMICS: Farming is textbook ‘competitive’,
 [except that it isn’t - differentiated products, transaction
costs, concentrated suppliers and buyers, ‘peasant’
household firms, highly heterogeneous factors, imperfect
knowledge, externalities etc.]
 BUT Competition => zero pure profits, and accumulation of
rents in factor (land) prices, and increased costs,
 & economic growth => declining “farm” sector
 Maintaining Competitiveness requires adjustment,
adaptation and innovation to the ‘tides’ of (free) markets.
 => decouple, and eliminate support -> target assistance for
public goods & market failures; support R&D & Extension;
enforce competition rules.
Back to Basics – the ‘Canute’
problem part 2
 POLITICS: - dominated by status quo – resist or ameliorate change,
protect vested interests, support the disadvantaged, respond to
votes:
 to help the uncompetitive survive and persist (be more
competitive) – especially the numerous small, the disadvantaged
– against unjust markets, oligopolistic suppliers and buyers & ‘less
favoured’ environments;
 Political Forces more powerful the greater the number of small
(uncompetitive) farms; the faster non-farm economic growth; the
bigger the farm sector; the greater the dependency (in supply
chains & bureaucracies, as well as among farms)
 = retain & justify historic support, limited to ‘deserving’ and
justified ‘public/merit’ goods & services arguments (which fail)
POLICY CONCLUSIONS
 RESULT – Political failure dominates, recruits “market failure” as
justification for continued support – which fails to deliver.
 CAP ‘reform’ very limited (as now) until there is a ‘perfect storm’
(as 1994, 2003)
 CAP inherently retards economic competitiveness, while trying (in
vain) to retain political/public competitiveness -> greater
complexity
 When and what will drive further reform?
 Euro disaster?
 Continual ‘drip’ of economic reason to erode political rationality?
 Continual failure of ‘support’ to deliver? -> recognition by farm
lobbies that they are incapable of retaining ‘their’ support?
 Will it go with a bang, or with a whimper?